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Employee lawsuits and capital structure

Author

Listed:
  • Omer Unsal

    (Merrimack College)

  • M. Kabir Hassan

    (University of New Orleans)

Abstract

We examine the effect of litigation on corporate capital structure by using a unique, hand-collected dataset of 30,841 employee disputes (after initial court hearings) between 2000 and 2015. We find that employee lawsuits increase firms’ leverage ratios, and firms with frequent employee allegations maintain high leverage ratios. The positive relationship between employee allegations and leverage also exists when we use other workplace-related violations, inspections, and complaints. Overall, our findings highlight the importance of employee treatment in the workplace environment.

Suggested Citation

  • Omer Unsal & M. Kabir Hassan, 2020. "Employee lawsuits and capital structure," Review of Managerial Science, Springer, vol. 14(3), pages 663-704, June.
    • Handle: RePEc:spr:rvmgts:v:14:y:2020:i:3:d:10.1007_s11846-018-0304-1
    DOI: 10.1007/s11846-018-0304-1
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    More about this item

    Keywords

    Capital structure; Labor disputes; Employment protection; Employee lawsuit; Financial distress costs;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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